e cost​ / (overage cost minus shortage​ cost). C. shortage cost​ / (overage cost​ + shortage​ cost). D. overage cost​ / (overage cost minus shortage​ cost).

You are watching: For seasonal products, the service level should be set to equal


C. shortage cost​ / (overage cost​ + shortage​ cost).


For computing the service level for the seasonal products, we divide the shortage cost to the overage cost plus shortage cost.

The overage cost is that cost which is incurred for ordering excess inventory which is not required for the present level of production level. It is a loss for the company.

And, the shortage cost is that cost in which the company has no stock in their warehouse through which it impacts the business image and the goodwill. The company"s customers will go to another company which results in the loss of the company customers.

For service level, we added the overage cost and shortage cost in the denominator side

So, the correct option is c.

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ABC Corporation issued $100,000 of 10%, 5-year bonds on January 1, 2018, for $92,280. The market interest rate when the bonds we
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ABC will pay bond holders $536.80 on July 1


The carrying value of the bonds=$92,280

Market value=$100,000

Meaning the bonds were issued at a discount of;

Discount=Market value-carrying value of the bonds


From January 1 to July 1 is exactly 6 months.

Cash paid after 6 months=Semiannual interest payments

Semiannual interest payments=(10%/2)×100,000=(0.05×100,000)=5,000

Interest expense=92,280×(12%/2)=(0.06×92,280)=5,536.80

Discount amortized=Interest expense-cash paid

Discount amortized=(5,536.80-5,000)=536.80

ABC will pay bond holders $536.80

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What is your standard deviation of demand during lead time if your average lead time = 5 days, standard deviation of demand = 4,




The computation of the standard deviation of lead time is shown below:

= √lead time × standard deviation of demand

= √ 5 days × 4

= √20

= 4.47

We simply applied the above formula to determine the standard deviation of demand during lead time

Hence, all the other items would be ignored

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The period manufacturing costs of a company is comprised of $2,000,000 in direct materials, $1,000,000 in direct labor, and $500

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